(h) (i) Calculate the NGDP in 2014.
NGNI + Factor Income sent abroad – Factor income earned abroad = NGDP
291.53 + 68.30 – 8.13 = 351.70 NGDP 2014
NGDP – factor income sent abroad + Factor income earned abroad = NGNI
358.97 – 75.90 + 9.49 = 292.56 NGNI 2015
(I) Determine RGDP in 2014 & 2015
NGDP – Inflation = RGDP
The inflation rate from 2014 to 2015 is given by the Deflator (which is a price index) that measures inflation from one year to the next.
2014 has a Deflator number of 100, this implies that 2014 is the base year and therefore has no inflation so the NGDP = RGDP
RGDP in 2014 is 351.70
2015 NGDP is 358.97 and the deflator is 100.88
NGDP/Deflator x 100 = RGDP
358.97/100.88 = 355.84 = RGDP 2015
(J) Calculate the rate of economic growth between 2014 & 2015.
Rate of Change formula = (New – Old)/ Old x 100
Growth is best-determined using RGDP numbers
(355.84 – 351.70)/ 351.70 x 100 = 1.18%
(K) Outline 1 possible disadvantage of Foreign Direct Investment (FDI) for economically less developed countries.
· Repatriation of profits and royalties may lead to balance of payment problems
· Importation of intermediate goods and capital goods may lead to balance of payment problems
· Domestic firms may be hurt as to small to compete
· Technology employed may be inappropriate so that employment decreases
· Income inequality may widen between rural and urban area where most MNC locate.
· The tax contributions may be less than expected because of tax concessions and /or transfer pricing.
· MNC’s may use their economic power to adversely influence market government policies.
· Production by MNC’s may result in negative externalities/exploitation of resources.
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